With the growing pace of digital and mobile payments, the financial industry is fast running out of available Bank Identification Numbers (BINs). Why are BINs important? So far, the 6-digit BIN is what helps business merchants identify the credit/debit card type, the network, and the issuing bank.
What is the main issue with 6-digit BINs? They are fast depleting as a result of a sharp increase in the number of payment card users and issuers in recent years. To address this shortage, the International Organization for Standardization (ISO) first announced in 2015 that the payment card industry must switch from the current 6-digit BIN to the new 8-digit BIN.
As a result of this announcement, VISA and Mastercard have both committed to moving to 8-digit BINs before April 2022. What about the rest of the players in the industry? Here is why they also need to prepare for migrating to 8-digit BINs.
Who will be affected by migration to 8-digit BIN?
The growing increase in credit (or debit) cards with the new 8-digit BINs will have a significant impact on financial players down the line. Who will mostly be impacted? This will include new and existing payment card customers, banks issuing payment cards, merchants accepting digital payments, and intermediary processors of online payments. Next, let us look at the consequences of migrating to 8-digit BINs.
How will 8-digit BINs impact payment card issuers?
Financial service providers, who make the transition to the 8-digit BINs will be better equipped to handle payment requirements and address their customer needs. Having said that, card providers must also prepare for serious challenges and consequences such as:
Risks of misrouted payment transactions
Recent studies have shown that the generation of new 8-digit BIN numbers can increase the chances of incorrect or misrouted payments through credit or debit cards. This can directly impact the customers and increase the chances of financial fraud. As stated by VISA, the erroneous and misrouted transactions made as a result of moving to 8-digit BINs cannot be charged back to the cardholders – and must be borne by the payment card issuer.
Administrative challenges
Payment card issuers use their unique BIN to store the card holder’s information. The sudden generation of additional BINs can pose several administrative challenges for both merchants and service providers. Here is a list of just a few of these challenges:
- Issuing new cards with 8-digit BINs and replacing old cards with 6-digit BINs
- Monitoring card usage and activation
- Implementing the backend system for the 8-digit BIN can be expensive
- Transaction processing errors will make it difficult to process a chargeback
Licensing and underutilization costs
Every payment card issuer pays a licensing fee for every new BIN created. At the same time, there is a penalty for underutilized BINs. There are approximately 1,000 8-digit BINs for each 6-digit BIN. According to VisaNet, less than 9% of forthcoming 8-digit BINs are currently active. Unutilized BINs need to be either returned to the credit card pool – or be levied underutilization costs.
We have looked at a few ways in which transition to the 8-digit BIN will impact payment card issuers. How can they prepare for this transition? Let us see in the following section.
How to prepare for 8-digit BINs
How do payment card providers prepare for the transition to the 8-digit BIN? Here are 5 things that they need to perform:
Perform an impact assessment
The 8-digit BIN migration will affect multiple stakeholders in your organization including your customers. At the outset, perform a high-level impact assessment to identify the areas where 6-digit BINs are being used in your system. For example, 6-digit BINs could also be used in supporting functional areas such as data analytics and reporting.
Some of the crucial business assessment areas that could be impacted by this migration:
- ATM transactions
- Billing
- Merchant servicing and disputes
- Application interface
- Fraud management
- Merchant point of sale
Debasis Mohanty
Debasis heads the delivery for all client engagements at Verinite. He has a long track record of delivering high quality, responsive, secure and cost-effective business and technology solutions in BFSI domain. Outside his work, he is an amateur animator, a sports enthusiast, a voracious reader and a Trivia buff.
